Multiple Choice
Consider the Modigliani and Miller world of corporate taxes.An unlevered (all-equity) firm value is $200 million.By adding debt,the annual interest expense is $40 million,the corporate tax rate is 25%,and the discount rate on the tax shield is 6%.What is the value of the firm after adding debt?
A) $366.67 million
B) $425 million
C) $433.33 million
D) $450 million
Correct Answer:
Verified
Correct Answer:
Verified
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